Douglas Emmett, Inc. (NYSE:DEI) Q3 2023 Earnings Call Transcript

Jordan Kaplan: Very far to come. There nothing to come down. I mean pretty much everyone pays.

John Kim : Okay. And looking at your top tenant list, I’m just curious, the tenant that you mentioned that downside during the quarter, was it among your top 5 tenants. There were a couple of very small movements this quarter. And then secondly, this is going back a couple of quarters. What happened in Macerich that fell off the top 10 list?

Stuart McElhinney: Yes. So John, no, the tenant that I mentioned, that downsized in Q3 was not on that top list. That list, I think we cut off at 1% of our rents I understand it.

Jordan Kaplan: That list is a tenant that could have like 20 locations.

Stuart McElhinney: Yes. So we gave you the ones — the tenants that are over 1% of our rent, which is kind of how we sign that list. And Macerich fell off that we they downsized a little bit, I think, last year and fell out of that. And then — but the other tenant I mentioned was not on that list to begin with.

Operator: Our next question will come from Bill Crow with Raymond James.

Bill Crow : I guess out there. Jon, a question for you. Years ago, we talked about the potential of reducing your equity investment in Hawaii. And I don’t think that market has gotten much discussion in the last few quarters. Is it more tempting given that you’re seeing some acquisition opportunities now to start to think about downsizing your Honolulu exposure?

Jordan Kaplan: Would be more attempting if we weren’t making so much money in I mean that’s a really successful market now for us. So you’re right to say that. It has to be structured correctly or smart to remember that. That had more to do is we have a lot of construction opportunity there for units. And it presents a great opportunity to bring in a partner for capital to do that with what we already own there. But I don’t — right now, it hasn’t gotten much discussion because — it’s not a big one on our list right now to start. We have some new construction; we can start up. We have units we can build out that right now, but we don’t like the — now we don’t like the combination of construction costs against where the rents are good, but construction costs are a little out of control.

So we’re watching it more for a while, but it is a really good market to bring capital into a joint venture with us to do that. And we actually have people who want to do that. So we’re the ones that are like kind of putting — put that on hold for a little while.

Bill Crow : Okay. Follow-up question, different subject, but the step-up in the parking revenues, curious whether that’s a volume issue or whether that’s a rate issue.

Peter Seymour: You’re just talking about the increase in parking and other income and —

Bill Crow : Yes, I’m curious whether you get more activity levels or – I’m sorry.

Peter Seymour: No, it’s been a steady – it’s Peter speaking. It’s been a relatively steady increase as utilization just continues to – it was relatively high last year, but it’s higher now.

Jordan Kaplan: Well, I hope it’s both. I hope it’s – we’re getting a little more for the spaces, and I suspect I mean it has a lot more to do with just more people.

Operator: Our next question will come from Steve Sakwa with Evercore.

Steve Sakwa : Yes, Jordan. I just wondered if you’ve made any progress with the insurance companies, broadly speaking, on the payments for the Barrington redevelopment.

Jordan Kaplan: Is there progress to know that we’re in heated disagreements because we’ve definitely gotten that far. We’re in extreme disagreement with those guys. And we have a lot of wood to chop there. We’re obviously not letting it go as they wanted to do. So this is going to take years probably to work out. It — but it is what it is.